Cherokee Global Brands reported financial results for the second quarter Fiscal 2016 ended August 1, 2015. Revenues decreased approximately 3% to $8.5 million, compared with $8.8 million in the prior-year period.
Article continues below
The decrease in revenues versus the prior year period was principally due to the increased strength of the U.S. dollar and lower sales of Cherokee-branded products in the UK and Canada.
The reduction in sales were due to the timing related to the termination of the Tesco relationship and the Argos launch in the UK this past July and in Canada due to the Target Canada bankruptcy earlier this year with the Sears Canada launch slated for February 2016.
SG&A expenses totaled $5.3 million, a 5.8% increase from $5.1 million in the prior-year period. The increase in SG&A was primarily due to an increase in professional fees related to the protection of intellectual property, transaction costs related to potential acquisitions and stock based compensation.
Operating income totaled $3.1 million, a decrease of 15%, compared with $3.7 million in the prior-year period. Operating margin was 37% versus 42% in the prior year period. For the six months ended August 1, 2015, operating margin was 48% versus 47% in the prior year period.
Net income totaled $1.9 million, or $0.22 per diluted share, compared to $2.3 million, or $0.27 per diluted share, in the prior-year period. For the six months ended August 1, 2015 net income totaled $5.5 million, or $0.62 per diluted share, compared with $5.8 million, or $0.69 per diluted share, in the prior year period.
herokee Global Brands also announced that Target Corporation has elected not to renew the license of the Cherokee brand in the US, which will expire at the end of its current term on January 31, 2017.
The Target license, including the existing royalty obligations, will remain in effect and continue to generate revenues to Cherokee in Fiscal 2016 and 2017. The Company does not expect the non-renewal to have any material impact on Cherokee Global Brands' revenue in Fiscal 2016.
Cherokee Global Brands anticipates that it will establish new channels for Cherokee branded products in the U.S. that will be available in Fiscal 2018.
The license agreement with Target for the Liz Lange brand remains in place at this time. The non-renewal does not have any impact on other licenses of the Cherokee brand to other partners around the world. ■